The Propagation order of Changes in the Central Bank's policy rate to the Interest Rates of the Financial System in Costa Rica

Jose Pablo Barquero-Romero () and Angelo Orane-Hutchinson ()
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Jose Pablo Barquero-Romero: Department of Economic Research, Central Bank of Costa Rica
Angelo Orane-Hutchinson: Department of Economic Research, Central Bank of Costa Rica

No 1503, Documentos de Trabajo from Banco Central de Costa Rica

Abstract: The paper main objective is to determine the order and magnitude of the effect that changes in the monetary policy rate have over the interest rates in the Costa Rican banking system. In order to get these estimations the paper uses structural autoregressive vectors (SVAR). The research covers the period between January 1999 and February 2014 and pays special interest to the period after the introduction of the new exchange rate system (end of 2006), this with the objective of identifying if the effect of the monetary policy has improved after the regime change. The results show that changes in the monetary policy rate will first affect the passive interest rates of the commercial banks and then the pass-through works indirectly through the passive interest rates to the active interest rates. Regarding the differences between state-owned banks and private banks there is evidence that the state-owned banks react first than the private banks to changes in the monetary policy rate. *** Resumen: Este estudio propone determinar el orden y magnitud de los efectos de cambios en la tasa de política monetaria sobre las tasas de interés del sistema bancario costarricense. Para esto se utilizan estimaciones de vectores autorregresivos estructurales (SVAR, por sus siglas en inglés). La investigación abarcará el periodo comprendido entre enero de 1999 y febrero de 2014 y con especial interés en el periodo posterior a la introducción del régimen de banda cambiaria (finales de 2006), con el objetivo de determinar si el efecto de la política monetaria mejora. Los resultados muestran que los cambios en la tasa de política monetaria se reflejan primeramente en las tasas pasivas de los bancos comerciales y luego de forma indirecta sobre las tasas activas. Con respecto a la diferencia entre bancos estatales y bancos privados, existe evidencia de que los bancos estatales reaccionan antes que los privados.

Keywords: Pass-through; Policy-rate, Efecto traspaso, Tasa de política monetaria (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2015-12
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Persistent link: https://EconPapers.repec.org/RePEc:apk:doctra:1503

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